Determining Home Insurance Limits of Coverage



How much coverage do I need on my home?

As a homeowner you are well aware of the value placed on your home by the County Assessor and you may even keep track of what the current market value of your home is, but do you know what it would cost to REBUILD your home?  Do you know what it would cost to remove the debris from your property?

Keeping the proper limit of coverage on your dwelling protects your largest investment so it’s an important item that should be reviewed regularly!

Assessed Value, Market Value and Replacement Cost

First of all, limits of coverage should NOT be determined based on the assessed value or even market value of your home. What you really need is adequate coverage to replace your structure including the cost of debris removal.

Cost of construction varies depending on your location.  The insurance industry uses a replacement cost estimator tool to calculate an appropriate limit of coverage. These programs factor the specific design and finishes of your home. They also calculate the cost of building materials and labor in your area.

Change in Construction Costs

To account for fluctuation in construction costs, most insuring companies provides extended dwelling limits.  This endorsement to your policy  increases the coverage limit on your dwelling by 25 to 50% depending on the carrier and package purchased.


Most policies include an inflationary coverage increase at each renewal.  Typical inflation increase is 2 – 4% annually. As a result coverage limits can often inflate to a limit higher than necessary.

Review your Coverage Limits

  • any time additional square footage has been added
  • upgrades in building finishes including hvac systems.
  • At least once every 5 years to ensure limits are in line with current cost of construction and the inflationary increase has not exceeded the replacement cost

Knowing the recommended limit of coverage for your unique home can lead to premium savings and peace of mind.



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